1. Global growth remains resilient

Global growth is expected to remain healthy in 2026 as governments around the world deploy fiscal stimulus to support their economies. In the US, the additional tax rebates from the “One Big Beautiful Bill Act” are estimated to be in the region of 150 billion US dollars, while German real government investment is expected to grow by 7%. At the same time, subdued wage pressures mean that inflation should remain contained. Markets expect a slight reacceleration in US inflation as tariff costs feed through to end prices, but central banks are likely to focus on labour markets and the bar for interest rate hikes remains high. This combination is a constructive backdrop for high grade credit. Resilient growth will power corporate earnings, but central banks are unlikely to raise interest rates.

This page looks at global growth across the world. The left-hand chart shows growth expectations for 2025 and 2026, while the right-hand chart shows activity surveys across the US, UK and eurozone. A level above 50 indicates economic expansion, while a number below 50 indicates a contracting economy. 

2. Earnings’ growth should support corporate spreads

This constructive view of the global economy is reflected in credit spreads, which remain tight across all major credit markets. However, these rich valuations are underpinned by strong fundamentals. Corporate balance sheets are healthy and global growth should support corporate earnings. Spreads typically remain tight so for extended periods of time, and only widen when corporate earnings come under pressure. While there is little room for spreads to tighten further, and investors should expect income to form the bulk of credit returns, the supportive economic backdrop means they are also unlikely to widen significantly. This should give investors confidence in stepping out into credit to take advantage of the additional income on offer.

This page focuses on global investment grade spreads. The left-hand chart plots US and euro investment grade spreads over time. The right-hand chart looks at how drawdowns in earnings typically coincide with wider credit spreads. 

3. High grade credit can add ballast to portfolios

Complementing equity allocations with high grade credit exposure should help diversify portfolio returns in case of a major change in artificial intelligence sentiment. Such a scenario would be deeply disinflationary, as falling capital investment and negative wealth effects would drag on economic growth. High-quality fixed income should provide a substantial buffer against equity losses. While government bonds are the traditional diversifier of choice, the low weight of the technology sector in the US investment grade credit index means that high-quality corporate bonds should also diversify in the case of a tech bust.

Our fixed income focus page zooms in on US technology. The left-hand chart compares the yield on investment grade debt issued by US tech firms to that of the broad US investment grade index. The right-hand chart looks at how exposure to the technology sector varies across different asset classes.